Credit likely to soften although remain stable

While credit conditions are expected to continue softening slightly over the next six months as the labor market encounters headwinds and the economy handles external shocks, they are expected to remain stable according to the American Bankers Association’s latest Credit Conditions Index released June 4..ABA’s Credit Conditions Index examines a suite of indices derived from the quarterly outlook for credit markets produced by ABA’s Economic Advisory Committee (EAC). The EAC includes chief economists from North America’s largest banks. Readings above 50 indicate that, on net, bank economists expect business and household credit conditions to improve, while readings below 50 indicate an expected deterioration. The bank economists were surveyed on June 2, 2026.“While bank economists anticipate some softness in credit conditions over the next six months, expectations have become somewhat more favorable,” said ABA Chief Economist Sayee Srinivasan.“Despite elevated inflation and modest job growth, the economy is still projected to expand.”For the second quarter release: The Headline Credit Index increased 11.3 percentage points in Q2 2026 to 48.8, after no change in the previous quarter. Credit conditions are still expected to weaken over the next six months, with an improvement in business credit conditions offset by a weaker outlook for consumer credit.The Consumer Credit Index rose 9.2 points to 42.5 in the second quarter, an increase after two consecutive quarterly declines. Overall expectations for consumer credit quality remained negative, while the outlook for consumer credit availability had improved into expansionary territory in the second quarter. Bankers express a mixed and cautious outlook for consumer lending.The Business Credit Index rose 13.3 points to 55.0 in the second quarter, following a 1.7-point jump in the previous quarter. The outlook for business credit quality remained unchanged, however the conditions for business credit availability improved into expansionary territory over the quarter indicating a more positive outlook.